Stay fixed or jump ship

michaelro

Currently half way through a 10yr fixed rate at 4.99

Took out the mortgage when rates were on the rise for security, but with rates so low am looking at ending early.

Have an offer of 20k to pay off the mortgage but must be used in the next few months.

Current mortgage only allows 5% overpayment (100k left, Current 60% LTV) so I'd only be able to take advantage of half that amount.

Suggestion was to exit mortgage (6% Early Exit fee) pay off capital (minus fee) and re-mortgage with a tracker.

Would reduce monthly and term but less security - thoughts anyone?

Cheers

dimbo61

Who is giving you £20K ?
You can only pay 5% off a year! does that run from 1-01-2011 to 31-12-2011 so £5K monday and £5K next month !!
Put rest into cash ISA,s and overpay next year
£6K to leave early is very expensive better to overpay the 5% allowed each year
Have you asked the question " Can I reduce the term please"

Wh05apk

If you have a 6% ERC with 5 years left, roughly speaking you would need to reduce your rate by about 1.5% over the next 5 years to recover the fee, so average about 3.5%, you would be unlikely to get a 5 year fixed at this rate, so a tracker would be your only option, if you got about 2.5%, it would take you about 3 years to recover your costs, assuming rates don't rise, personally I would stay where you are, but overpay to your maximum.

Presumably the lender is Woolwich?

michaelro

dimbo61 wrote: »

Who is giving you £20K ?
You can only pay 5% off a year! does that run from 1-01-2011 to 31-12-2011 so £5K monday and £5K next month !!
Put rest into cash ISA,s and overpay next year
£6K to leave early is very expensive better to overpay the 5% allowed each year
Have you asked the question " Can I reduce the term please"

Family

My 'year' runs from 01/02 - 31/01 so I can pay £5k now and £5k in 7 weeks.

Will probably reduce the term (lender has indicated ~3 years for £10k)

Wh05apk wrote: »

If you have a 6% ERC with 5 years left, roughly speaking you would need to reduce your rate by about 1.5% over the next 5 years to recover the fee, so average about 3.5%, you would be unlikely to get a 5 year fixed at this rate, so a tracker would be your only option, if you got about 2.5%, it would take you about 3 years to recover your costs, assuming rates don't rise, personally I would stay where you are, but overpay to your maximum.

Presumably the lender is Woolwich?

When I posted I thought my ERC was only 3% until I dug out my statement and edited my post

Until now I hadn't considered a Tracker but with some quick research had found a term tracker at HSBC at 2.6% Fee Free

Obviously I have the risk of rates rising but the thought as I posted was to take the hit of the ERC so I could throw the rest of the money at the Capital and get a mortgage for a similar monthly amount but over a shorter term.

As it's 6% I am more inclined to stay and as dimbo suggested pay that cash into an isa for next year

Good guess!!

Thanks Guys :beer:

dimbo61

What i did while in a 5 year fixed rate deal was to ask my lender can I reduce my term from 22 years down to 10 years ( this cost me £50)
I then had to pay an extra £500 a month
Check if you can reduce the term so that it ends in 5 years !
Now this will increase the mortgage payment big style and you would quickly use up the £20K once that happens then spead the mortgage back out to the original term